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The Plan to Trap Your Money

I often think the Internal Revenue Service was designed to strike fear into the hearts of Americans — the government’s own boogie man. And what better way to scare people who have been careful enough to protect their wealth from America’s downward spiral by putting it on those of us smart enough to stock our wealth outside of U.S. shores and financial institutions.

The government’s latest attempt at currency controls comes in the form of the Foreign Account Tax Compliance Act (FATCA), which is set to take effect on July 1. By forcing banks across the globe to report on any American account holders, the IRS will now have the ability it wants to go after wealth held overseas. But the real value of FACTA will be to make Americans unattractive clients … giving us no way to move our money out of harm’s way.

Democratic Senator Carl Levin claims that $100 million in taxes is being evaded each year by U.S. citizens through the use of offshore accounts.

That’s a pretty figure, Senator Levin, but I’ve got a better one for you.

How about $3.5 billion in unpaid taxes from just federal employees?

Shocking, isn’t it? But it’s true.

According to the IRS, and reported by USA Today, more than 311,000 federal employees were tax delinquents in 2011, owing a total of $3.5 billion to the government.

Yes, as you can see, the best way to avoid paying taxes is to actually work for the government. And here I thought having an offshore account to protect and diversify my assets against the coming dollar collapse due to government mismanagement and asinine monetary policies was the best choice. It’s almost as if FATCA were little more than a diversion to keep you from realizing that the real money owed is held in Washington D.C.

And the icing on the cake? The pièce de résistance?

You could actually earn a bonus while not paying your taxes. A recent report from the Treasury Inspector General for Tax Administration showed that the IRS paid out discretionary awards of more than $1 million in cash bonuses and more than 10,000 hours in paid vacation time — valued at about $250,000 — was awarded to more than 1,100 IRS employees who have not paid their taxes. What’s more, five employees were given performance awards after they were disciplined for intentionally under-reporting their tax liabilities for several years, paying their taxes late and under-reporting taxes.

Last I checked, the entire purpose of the IRS was to enforce U.S. tax laws. If I had failed to pay my taxes last year, I’m pretty sure that IRS wouldn’t have handed me a cash bonus. But apparently all I really needed to do was get a job with the IRS.

An Old-Fashioned Witch Hunt

Rather than get its house in order and force its own employees to operate by the rules they are supposed to be enforcing, Washington has chosen to chase after fiscally responsible Americans who are trying to protect what they’ve worked hard to earn.

The palpable desperation in Washington to bring in funds for their reckless spending has made them indifferent to that fact that the implementation of FATCA will result in banks spending about $1 billion to ensure compliance, according to a survey by the Securities Industry and Financial Markets Association. They also seem indifferent to the fact that record numbers of Americans are giving up their citizenship not to avoid taxes but to protect their privacy and the income of their non-American spouses from FATCA. Instead these people trying to protect themselves have been labeled traitors and tax dodgers, while the real tax dodgers are living fat and sassy working for the government.

We’ve seen countries enact harsh laws in the past to keep money from leaving their borders. Just look at Iceland in 2008 when they made it illegal for their citizens to exchange their massively deflated krone for dollars or euros. Or how about Argentina’s corralito in 2001, when banks froze all assets for 12 months, allowing only small sums to be withdrawn. FATCA is proving to be a more subtle form of the exact same monetary policy, making America landlocked for investments. If the government makes it too difficult to diversify your assets in offshore accounts, the idea is that you will give up and keep them in the U.S., where they remain vulnerable to dollar collapse and economic upheaval.

There is a small hope of reform. Bills have been introduced to both the House of Representatives and to the Senate that would require federal employees to be fired if they are seriously late paying their taxes. Despite the government’s efforts to get its hands on our hard-earned wealth, keeping a portion of your money outside the U.S., while being fully compliant in all the reporting regulations is an absolute necessity so you are protected against additional government antics.

Disclaimer

The viewpoints and opinions expressed do not take into account any particular individual's investment objectives, financial situation, political agendas or religious beliefs. My views shared are my own which are derived from my personal experiences and influences and I am free to change them at any time, or realign to accommodate any new conditions and information available. I cannot guarantee the information to be free of mistakes and incorrect interpretations. Any financial topics must not be taken as advice and past performance is not indicative of future results. The information, including commentary, investment ideas, legal, tax and other specialised subjects, should not be relied upon as a substitute for independent professional consultation, which should always be explored before making any financial or legal decisions.